Do daily deals work? Part 1

So a study was published recently that seemed to call into question the viability of the daily deal business model. While I don’t agree with the study’s conclusions about daily deal operators, I think that it does contain interesting info for people who are interested in running deals. I’m going to put together a series of posts that look at how the data inside that study applies to the business’ that get featured. This is part 1

The first data I’ll mention is about money. If you recall in my previous post the goal of a daily deal shouldn’t be about making money; however, here are the stats of how people actually make out. According to their survey of 324 business that ran a deal 55.5% of them reported making a profit, 17.9% broke even, and 26.6% of people lost money. Remembering that daily deals are the replacement for an expense this should be exciting. 73.4% of all business’ then have run very successful deals and perhaps a majority of the remaining 26.6% were success’ too, when success is measured by whether or not doing the deal cost less than equivalent marketing would have. Even among those that lost money they would have to have spent money buying effective marketing from someone else. Buying an email/snail mail/advert isn’t cheap, and is far less trackable than a daily deal.

The take away from this is that for an overwhelming majority of people who run a deal they have reduced an expense to less than it was in the past. If your marketing budget could be reduced then much how would that impact your business? Ok, that’s the first main data point in the study. In the next post I’m going to be talking about those remaining people who got crushed when they ran a daily deal. I’m going to outline the mistakes that they all share, and how to avoid them. Then, back into the data.